Switching Electricity Companies

Switch Electricity Companies - What You Need To Know

In many parts of the country, businesses and homeowners have the power to choose their energy provider. Energy deregulation in these markets means competition among electricity suppliers drives down the energy cost to end users. While the Texas market has variations to the other deregulated states (New Jersey, Ohio, New York, Massachusetts, Pennsylvania, Connecticut, Illinois, Maryland, Delaware, Maine, New Hampshire, Rhode Island, Virginia), the concept of shopping for electricity suppliers remains consistent.

Switching electricity suppliers in Texas

Since energy deregulation started in 2002, Texans have had the ability to choose their energy provider. Unlike other states where consumers can elect to stay on default utility supply, Texas residents and business owners must choose a retail electric provider (REP). Utility companies are responsible for maintaining the poles and wires that transmit electricity, but suppliers are the companies who purchase electricity from generators on the wholesale energy market and then sell that to the end-user.

While the term “switch” may insinuate that you move from one supplier to another, we really mean that you are switching to a new plan once your current plan has expired. The best way to stay on top of electricity rates and competitive suppliers is to partner with an advisor like 5 Digital Energy. Navigating electricity and natural gas markets is a full-time job that most business owners don’t have the time or expertise to handle.

It is important to note that switching suppliers will not affect the reliability or safety of your electricity service, as the transmission and distribution of electricity is still regulated by the Public Utility Commission of Texas (PUCT) and your chosen supplier cannot impact whether the lights stay on.

Here’s what we’ll help you consider when it’s time to switch energy providers:

Take advantage of market opportunities

The electricity and natural gas markets experience more volatility than any other commodity. Energy rates change every hour. The market fluctuates based on supply and demand and is influenced heavily by weather and government regulations.

5 Digital Energy has over 850 years of combined energy experience. Our job is to help our clients navigate these power markets and empower people to make informed energy decisions.

The best way to capitalize on a market opportunity is to partner with an advisor you can trust.

We can help you decide the best time to lock in new rates based on market conditions. Electric bills are usually a top 3 expense for small businesses; we can help manage risk around this expense by informing you of market opportunities so you can put renewal contracts into place at the most opportune times.

Understand different types of energy plans

The electricity prices you see online are measured in cents per kilowatt-hour (kWh). You can find your current kWh by looking at the Supply portion of your energy bill. Knowing your electric usage can help narrow down the appropriate rates for your home or business. There are several types of electricity plans that customers can choose from, including:

  1. Fixed-rate plans: These plans offer a fixed price per unit of electricity for the entire duration of the contract. The customer’s rate is not affected by changes in the market price of electricity.
  2. Variable-rate plans: These plans offer a fluctuating price per unit of electricity that is based on the current market price. The customer’s rate can change from month to month and is affected by changes in the market price of electricity.
  3. Time-of-use plans: These plans offer different prices for electricity at different times of the day, based on the time of use. The customer’s rate is higher during peak demand periods and lower during off-peak periods.
  4. Green energy plans: These plans provide electricity that is generated from renewable sources such as solar or wind power.  They may also be utilizing renewable energy credits or RECs.

When searching online for electricity rates, different websites can show a mix of these different plans without clearly defining the differences between contract terms and budget impacts.

The lowest electric rate does not always equal the lowest electric bill.

There are many components of an electric rate. The reason you see so many different rates online is because the retail electric providers can choose how to represent those rates. For example, if you see an offer that is very low, that may mean that the supplier has elected to pass a certain cost components through to the final invoice instead of lumping it into the rate.  In that case, the contracted “rate” may be lower but your overall bill may be the same or higher than others when all the pass through costs are added up.

We have found that fully fixed rates tend to be the most beneficial for small and medium businesses as it allows energy costs to be more accurately budgeted and managed.

Review early termination fees

An early termination fee (ETF) is a fee that is charged to customers who terminate their retail electricity agreement before the end of the contract term. The fee is intended to compensate the electricity provider for the costs associated with early termination such as changes in the energy market, lost revenue, administrative costs, and the cost of finding a new customer.  For most commercial contracts, the cancellation fee is based on the number of months remaining in the term of the agreement.

Alternatively, some providers may charge a fixed dollar amount for each month remaining in the contract. For example, if the ETF is $50 per month and the contract has 12 months remaining, the ETF would be $600.

It is important for small business owners to review the ETF calculation in the retail electricity agreement before signing the contract, to ensure that they understand the terms and the potential financial impact of early termination.

Overview

Overall, switching electricity suppliers in Texas can lead to cost savings and better options for consumers. It is important to find an energy advisor you trust who understands the power markets and how this purchase can impact your business. Before renewing with your current provider, understand all of your options by visiting the 5 Digital Energy website or by contacting us!

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